Advanced economies to dictate prices

With the latest shudders in financial markets seemingly contained, most commodity prices ground steadily upward over the week. Oil prices did receive a boost from supply disruptions in Iraqi Kurdistan but, on the whole, a greater appetite for risk drove commodity prices. Although we share this optimism that a full-blown banking crisis will be avoided, we now expect that economic growth in the US and euro-zone will be weaker this year due to tighter credit conditions. Accordingly, we have made several changes to our commodity price forecasts, outlined in our Outlook published today.

Next week commodity prices should be back in more familiar territory, with the macro outlook driving prices. Manufacturing PMIs for March will be released on Monday and will give the first steer on how global industrial activity has fared. OPEC’s advisory committee will also meet then although we, like everybody else, do not expect any change to the group’s output quotas. And US the unemployment rate and payroll numbers for March will be released on Friday. We expect both to show that the US labour market is cooling but if we are wrong, commodity prices may fall if the dollar appreciates.